Barry—
Thanks for your comment on “Should 21-Year Olds Pay Less . . .” While we’re in agreement on many points, I have to disagree with your first sentence—that “in theory the Massachusetts approach of charging older people up to twice as much as younger people for health insurance is more reasonable, in my opinion, than pure community rating because younger people, as a group, incur far lower healthcare costs.”
I believe that insurance, by definition, is supposed to get everyone into one pool so that those who need less care can help those who need more care. You are, of course, right that younger people incur far lower costs—until they get older. At that point, another generation of young people will help pay for their care. That’s how insurance is supposed to work.
You’re not paying premiums to cover your own care; you are paying premiums to cover care for whoever in the pool (young or old) is unfortunate enough to need more care. We can predict that, as a group, younger people will need less care. But we can’t predict which individual 25-year-old will be in a car accident, run into serious problems during pregnancy or develop a brain tumor. That’s why there is no “fair” way to decide how much any individual should pay. And because we can’t predict how much any individual, young or old, will take out of the system, the fairest solution is to charge everyone the same amount—after making adjustments based on income. This is what we do with Social Security. Some people pay far more than they will ever take out of the system because they live only until they are 70, but are in very good health and die in their sleep.. Others have the good fortune (or bad fortune, depending on how you look at it) to live to 105, and will, almost inevitably take out more than they put in.
On the other hand I tend to agree that if we are going to ask insurers to provide coverage for everyone at the same price, everyone should have to buy insurance, with subsidies for those who can’t’ afford the going rate.
But since our tax system is not as progressive as it should be (favoring the wealthy over the middle class by taxing capital gains, dividends and other “passive income” at a much lower rate than the income that working people earn, and by giving people who can afford million-dollar mortgages a windfall deduction), I’m not enthusiastic about financing subsidies with payroll taxes. I’d much rather see higher taxes on tobacco and alcohol since these taxes would simultaneously encourage less smoking and less drinking. (As I noted in a post below (“Should People Who Don’t Take Care of Themselves Pay More?” there is solid evidence that higher tobacco taxes reduce total cigarette consumption—particularly among children. And that’s crucial: if people don’t become addicted to tobacco before they’re 21, the chances are slim that they ever will. I’m guessing that higher taxes on beer, wine and alcohol would have a similar effect. I realize that poorer people are more likely to smoke and so this is a regressive tax, but in this case I think the government would be doing them, and their children, a huge favor by making tobacco harder to afford.
Insofar as we also would need to raise payroll taxes, I would favor your idea of taxing capital gains and dividends along with earned income to raise the needed funds. But I wouldn’t cap the income taxed at $97,700. Again, that’s a regressive tax that puts an unfair burden on the middle class (which I define, very roughly, as people earning between $40,000 and $75,000). I would tax total income up to $1 million—spreading the cost so that the middle class would wind up paying a significantly lower rate.
I also would expect employers to pay as much as they now contribute to their employees’ healthcare into a fund that would help poor, working class and some middle-class people pay insurance premiums. Employers who do not now provide insurance also should also be required to contribute—according to their ability to pay. We’d need a complicated formula that might exempt small start-up businesses during their first three years of existence as well as businesses that operate on a very small profit margin. In other words, we’d need a sliding scale for less profitable, smaller businesses. But I wouldn’t exempt employers simply because they have fewer than ten employees. Unfortunately, there are a surprising number of physicians out there with only six or seven employees who offer them no health insurance—while the doctors takes home, say $500,000 (after expenses) each year.
On paying for proven vs. unproven treatments, I think we agree that insurers should pay less and the patient should pay more if there is no medical evidence that the treatment is more effective than less expensive treatments. In some cases, I think insurers should pay nothing for unproven treatments except in experimental trials that are accumulating data about effectiveness. And you are probably right that, on the whole, it would probably be hard for insurers to pull back and stop paying for treatments that they are now covering. Though if solid research reveals that a product or procedure already on the market is, in fact, over-priced without providing additional benefits, I think Medicare and other insurers could pull it from the covered list. (Here I would add that in many cases, a treatment may be more effective for a small group of patients, and insurers would need to draw that distinction, covering the product under certain circumstances.)
Finally, I, too, would like to see Medicaid operate under one nation-wide set of rules—but I would also like to see it folded into Medicare. Right now, doctors are paid much less for treating a Medicaid patient than they are paid for treating a Medicare patient suffering from the same disease. Why? Is it easier to treat poor people? Less time-consuming? If anything, the reverse is true. I certainly think that Massachusetts needs to subsidize insurance for both younger and older people who can’t afford premiums. But there is no reason to penalize older patients for being old.